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Can we really beat trading costs?

  • #41
  • Sep 6, 2017 6:41am Sep 6, 2017 6:41am
Quoting Mysteeri
{quote} Thatīwhat I mean... I was just trying to figure out where that statement of double spreads came from.. Opening hedge is just same as stopping your trade and taking it again... only reasons why someone would use hedge instead sl/tp are: 1. You are short and you decide that actually you should be long.. By opening hedge first, before closing that original short position you are able to open as much lots as you were originally short with. That case only matters when you have too big leverage (your balance wouldīnt let you open same amount anymore.)...
to 1: you can do so, but smarter is closing the trade then hedging it.
to 2. will not work, after closing one site your have again margin for this still open site. only wasted money.
  • #42
  • Sep 6, 2017 12:39pm Sep 6, 2017 12:39pm
Quoting Samer1970
{quote} THIS IS THE ANSWER TO YOUR QUESTION {image}
I think some misconception happened here.

Let's consider an example:

EURUSD 1.1910/1.1911 Spread - 1 pip.
I decide to buy 1 lot EURUSD at ask price at 1.1911
Let the rate rise to 1.1920/1.1921, i.e. by 10 pips.
To close position I execute Sell 1 Lot EURUSD order at bid price - 1.1920.

My total win is 9 pips. 1 pip spread paid.

The point is that broker charges the spread when you open a trade and not when you close it. In case of price moving against you by 10 pips - 1.1900/1.1901 you sell at 1.1900 and lose 11 pips.
  • #43
  • Edited 1:14pm Sep 6, 2017 1:02pm | Edited 1:14pm
Quoting TradeGraph
Each time you complete a trade cycle( open and close) for a symbol, you are paying twice the spread of the symbol to the broker.
My br0ker (Pepperstone) operates differently.
With a buy trade, I simply enter at the ask price and exit at the bid price.
With a sell trade, I enter at the bid price and exit at the ask price.
Hence I pay the 'spread' effectively only once per roundtrip trade.
If you have a razor account, you pay commission also, but the 'spread' is smaller, to compensate.
  • #44
  • Sep 6, 2017 3:49pm Sep 6, 2017 3:49pm
Quoting available
{quote} I think some misconception happened here. Let's consider an example: EURUSD 1.1910/1.1911 Spread - 1 pip. I decide to buy 1 lot EURUSD at ask price at 1.1911 Let the rate rise to 1.1920/1.1921, i.e. by 10 pips. To close position I execute Sell 1 Lot EURUSD order at bid price - 1.1920. My total win is 9 pips. 1 pip spread paid. The point is that broker charges the spread when you open a trade and not when you close it. In case of price moving against you by 10 pips - 1.1900/1.1901 you sell at 1.1900 and lose 11 pips.

you pay the spread for example 30 points x 0.01 lot = 0.3 usd for the trade sell for example

you will wait 30 points to go down from the Ask to Bid level this is another 30 pips you pay it but not directly, this is the cost of waiting to close the trade on buy

you make sell eur and buy usd

when to close it you buy eur and sell usd

do you think your broker will make this close free for your own eyes sake... come on man
GUYS BE AWARE FROM HUNTING YOUR STOP LOSSES BY YOUR BROKER & BY "GHOSTS"
  • #45
  • Edited 5:00pm Sep 6, 2017 4:33pm | Edited 5:00pm
Quoting Samer1970
you pay the spread for example 30 points x 0.01 lot = 0.3 usd for the trade sell for example you will wait 30 points to go down from the Ask to Bid level this is another 30 pips you pay it but not directly, this is the cost of waiting to close the trade on buy you make sell eur and buy usd when to close it you buy eur and sell usd do you think your broker will make this close free for your own eyes sake... come on man
Here is how I see it:

Price quote (bid/ask) is 9010/9011. So I enter my buy trade at 9011. (Spread is 9011 - 9010 = 1 pip)

Then price rises 10 pips to 9020/9021. I close my buy trade at 9020. (Spread is 9021 - 9020 = 1 pip)

My net profit is 9020 minus 2011 = 9 pips, during which time the price quote rose by 10 pips.

Therefore the cost was only 1 pip across the whole roundtrip trade, or the equivalent of 1 x the spread.

[Note: If you choose to count a move from 9010/9011 to 9020/9021 as being 9021 minus 9010 = 11 pips (but why would anybody do this???), then it might seem like you've paid 2 pips instead of 1 pip.]
______________________

[EDIT]
Instead of seeing it as "I pay the spread", I prefer to see it as "I buy at the ask price" and "I sell at the bid price". Why? Because the 'spread' can be different at the entry and the exit.

Example:
I enter a buy trade at 9020/9023. The 'spread' is 3 pips.
I exit the trade at 9030/9031. The 'spread' is now only 1 pip.
My net profit is 9030 minus 9023 = 7 pips.

Now, has price risen 10 pips (from bid to bid: 9020 to 9030), or 8 pips (from ask to ask: 9023 to 9031)? There's no right or wrong answer.

Did I pay 1 pip or 3 pips in spread? There's no right or wrong answer.

The only thing I can say for sure was that my net profit was 7 pips. I bought at the ask price, and sold (exiting a buy is a sell order) at the bid price.
  • #46
  • Sep 6, 2017 4:35pm Sep 6, 2017 4:35pm
Quoting available
{quote} The point is that broker charges the spread when you open a trade and not when you close it. In case of price moving against you by 10 pips - 1.1900/1.1901 you sell at 1.1900 and lose 11 pips.
most people learned wrong what is spread!

there is an normal middle price (middle of ask and bid)=MP.

the true payed spread for your order is: ask-MP + MP-bid.
ask and bid and MP are always calculated to the time you open and close ofcourse! so easy is spread. nothing complicated.
  • #47
  • Sep 6, 2017 6:41pm Sep 6, 2017 6:41pm
Quoting hanover
Example: I enter a buy trade at 9020/9023. The 'spread' is 3 pips. I exit the trade at 9030/9031. The 'spread' is now only 1 pip. My net profit is 9030 minus 9023 = 7 pips. Now, has price risen 10 pips (from bid to bid: 9020 to 9030), or 8 pips (from ask to ask: 9023 to 9031)? There's no right or wrong answer. Did I pay 1 pip or 3 pips in spread? There's no right or wrong answer.

I see the mechanics exactly the same as you, of course.

But I think there is a right answer: you paid half the 3-pip spread (1.5 pips) when you opened the trade + half the 1-pip spread (0.5 pips) when you closed it, so you paid 2 pips in spread altogether.

And everyone does that: they pay half their opening spread + half their closing spread. If the spread doesn't change while their trade's open, they therefore pay one full spread per round-trip.

Not really difficult? This conversation just became confused by someone posting above who didn't understand that this is how it works and mistakenly imagined you pay a full spread on each transaction.
  • #48
  • Sep 6, 2017 8:15pm Sep 6, 2017 8:15pm
Quoting KarlKraus
But I think there is a right answer: you paid half the 3-pip spread (1.5 pips) when you opened the trade + half the 1-pip spread (0.5 pips) when you closed it, so you paid 2 pips in spread altogether.
Fair enough.
  • #49
  • Sep 6, 2017 8:59pm Sep 6, 2017 8:59pm
Quoting hanover
{quote} My br0ker (Pepperstone) operates differently. With a buy trade, I simply enter at the ask price and exit at the bid price. With a sell trade, I enter at the bid price and exit at the ask price. Hence I pay the 'spread' effectively only once per roundtrip trade. If you have a razor account, you pay commission also, but the 'spread' is smaller, to compensate.
I second that.
Holy grail, pls pm
  • #50
  • Sep 6, 2017 9:47pm Sep 6, 2017 9:47pm
Do you ever consider not taking trades because you will have to pay swap, spread, commission? Those are the cost of using the broker's service.

At some point you had like $900 profit after all broker fees.

There is your answer - Yes

If people are barely breaking even or in the red due to broker fees then they are just bad at trading.

With my broker .01,1-2 pip spreads are the standard and for 1 lot you pay $3 commission, so you just need to not suck at trading and profit for more than 3 pips per trade and the broker fees become irrelevant.
Dragon Rider
  • #51
  • Edited Sep 7, 2017 12:34pm Sep 6, 2017 9:58pm | Edited Sep 7, 2017 12:34pm
Quoting barloc
At some point you had like $900 profit after all broker fees. There is your answer - Yes.
Perhaps, but that was over less than 300 trades, which in my opinion is a pretty small sample for someone who day trades.

I dont think much can be made of these results, as variance is still a real part of the overall picture. And today certainly proved that variance can rear its ugly head at any time.
  • #52
  • Sep 6, 2017 10:29pm Sep 6, 2017 10:29pm
Quoting Nico1359
{quote} I wouldn't be trading with this kind of leverage on any substantial amount of capital. I started this account with $100 knowing that I was going to be trading with awful risk management at the outset because I really don't care if I lose $100. The plan is to scale down the amount of leverage I use as the account grows.

Just don't increase your trade size as the account grows... or do so very slowly. That inherently reduces your leverage/account ratio. It doesn't matter how much leverage is available if you aren't using it. I, personally, would have 1:1000 leverage if I could (and still trade as though it were 1:10)
"The fun is in the hunt. Not the kill."
  • #53
  • Sep 6, 2017 11:11pm Sep 6, 2017 11:11pm
Quoting dukas_trader
{quote} to 1: you can do so, but smarter is closing the trade then hedging it. to 2. will not work, after closing one site your have again margin for this still open site. only wasted money.

I mean, that by hedging you may trade with bigger lots than your leverage would let you. It is risky and stupid at most cases, but if someone wants to use bigger leverage than offered, thatīs the way to do it.
Why U.S brokers are not allowed to use hedge? Because they have to limit leverage to 1:50, and by hedging traders could multiply that leverage...


About spread thing... it is not actually "paid" for anyone... You just may sell items to some price and buy them for other price... there must be a gap between those prices, since if they were the same, trade would be already done. Of course market makers add something to the price feed they get from liquidity providers to make their living... Thatīs why I recommend to use ECNs... SInce I stopped trading wit mmīs I started to actually gain some consistency. Now with ECN broker, only wide spreads I see are at the bedroom
  • #54
  • Sep 6, 2017 11:14pm Sep 6, 2017 11:14pm
No one has ever become rich alone without making others rich. This is an important mentality in being profitable/cutting losses early. You've got to think rich to be rich.

The broker provides a very important service for us. Leverage, reliability and allowing us to trade at our fingertip all the while employing customer service people 24/7, so honestly, if you can get your spread to profit ratio down to 15% or less, good game.
  • #55
  • Sep 7, 2017 12:19am Sep 7, 2017 12:19am
Quoting Mysteeri
{quote} I mean, that by hedging you may trade with bigger lots than your leverage would let you. It is risky and stupid at most cases, but if someone wants to use bigger leverage than offered, thatīs the way to do it. Why U.S brokers are not allowed to use hedge? Because they have to limit leverage to 1:50, and by hedging traders could multiply that leverage... About spread thing... it is not actually "paid" for anyone... You just may sell items to some price and buy them for other price... there must be a gap between those prices, since if they...
you dont trade any bigger lots with hedging then without, not even 0,0000001. you calculate it wrong. you dont go any higher then your leverage like before.
only net is important. if you trade 1 mio sell in eurusd and 2 mio buy you trade 1 mio buy. so easy. if you trade 5 mio buy and 4 mio sell its still 1 mio buy. nothing different, not more amount traded. only net is important. same , balance is unimportant, noone should look at this, only equity is important.
so dont look at balance, always equity.
dont look at each position , only net position is important.
thats the way to trade.
  • #56
  • Edited 1:20am Sep 7, 2017 12:28am | Edited 1:20am
Quoting dukas_trader
{quote} you dont trade any bigger lots with hedging then without, not even 0,0000001. you calculate it wrong. you dont go any higher then your leverage like before. only net is important. if you trade 1 mio sell in eurusd and 2 mio buy you trade 1 mio buy. so easy. if you trade 5 mio buy and 4 mio sell its still 1 mio buy. nothing different, not more amount traded. only net is important. same , balance is unimportant, noone should look at this, only equity is important. so dont look at balance, always equity. dont look at each position , only net position is important. thats the way to trade.


Deposit enough to open 2.2lots trade..

Open 2 lot buy, then 2lot sell.. open 2lot buy again.. then close sell position, And you are long with 4lot...
  • #57
  • Sep 7, 2017 8:18am Sep 7, 2017 8:18am
Quoting Mysteeri
{quote} Deposit enough to open 2.2lots trade.. Open 2 lot buy, then 2lot sell.. open 2lot buy again.. then close sell position, And you are long with 4lot...
are you sure you are not in margin call situation at this time??? and will be closed immediatly? the margin call and stop out level should be reached by this method at the moment by closing the 2 lot sell. i dont know what simple broker you use, but with a normal broker, he would not allow it and simple close all your position or enough (depends on broker) so you get in back under margin call level.
  • #58
  • Edited 12:08pm Sep 7, 2017 11:58am | Edited 12:08pm
I trade with tickmill, stop out level is 30%, so not problem... I never use that method though, but one way how to use hedging..

hardly any broker has stop out level 100%..at least, what I have used.

and Yes, at margin call you would be.
  • #59
  • Sep 12, 2017 3:36am Sep 12, 2017 3:36am
Quoting hanover
{quote} My br0ker (Pepperstone) operates differently. With a buy trade, I simply enter at the ask price and exit at the bid price. With a sell trade, I enter at the bid price and exit at the ask price. Hence I pay the 'spread' effectively only once per roundtrip trade. If you have a razor account, you pay commission also, but the 'spread' is smaller, to compensate.

Same at Hotforex, as I mentioned in my previous post.

It's strange that people understand "pay spread" directly. Spread is a result not a kind of sunk cost (if we talk about spread in trading terms). You don't pay anything to enter trading. Instead you don't make max possible profit in the market in exchange of instant possibility to buy or liquidate position (liquidity).


Cheers
  • #60
  • Sep 12, 2017 6:32am Sep 12, 2017 6:32am
Quoting Mysteeri
I trade with tickmill, stop out level is 30%, so not problem... I never use that method though, but one way how to use hedging.. hardly any broker has stop out level 100%..at least, what I have used. and Yes, at margin call you would be.
ok, but even with 30% stopout level you shoud have an margin call.
you are with your 4 lot open and account big enough for 2,2 lot trades by under 20% , so 30% stopout level is already reached without any problem.
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